Why Women Are Falling Short: Some Basics
To spend their retirement years in comfort and security, women must
start planning early. The first step in this process is understanding why
retirement security is so elusive by looking at some of the most basic and
troublesome facts about women’s earnings, work status, life expectancy, marital
status, and retirement income:
Earnings
• Two-thirds of working women earn less than $30,000 a year.
• Nearly half of all women work in low-paying jobs without retirement
plans or 401(k)s.
• Women earn on average 77 cents for every dollar earned by men.
Work Status
• Women are more likely than men to work part-time. Part-time employment
is associated with lower wages, fewer opportunities for promotion, a lower likelihood
of pension coverage and eventually smaller benefits.
• Over a lifetime, women will spend 27 years in the workforce, compared
to almost 40 years for men.
Life Expectancy
• Today, an average woman’s life expectancy at birth is 80.1 years,
compared to 74.8 years for men. If a woman lives to age 65, she can expect to
live until the age of 84 or 85―about four more years than a man.
Marital Status
• Between the ages of 75 and 84, only 34 percent of women are married
with a spouse present. For women age 85 and older, only 13 percent are married
with a spouse present.
• With the death of a spouse, a woman often experiences a steep drop in
income—from her spouse’s pension and even from Social Security.
Retirement Income
• The median income in 2004 for retired women was $12,080 compared to
men’s income of $21,102.
• The poverty rate in 2004 for single white women age 65 and older was
over 20 percent; that rate was double for single African American and Hispanic
women.
• Social Security continues to be the only source of income for one in
four unmarried women.
The Three Legs of the Stool
Many older women rely on Social Security as their primary or only
source of retirement income—it keeps almost 40 percent from falling into
poverty. However, Social Security replaces only 40 percent of an average
worker’s wages. That 40 percent is not enough alone, and the fact that they are
without other sources of income such as pensions or savings is one of the major
reasons why so many older women live at poverty’s door.
Private pensions and retirement savings plans such as 401(k) or 403(b) plans are the second leg of the retirement
stool. They are a valuable part of a retirement income package, but they are not
always available to women. Less than one-third of retired older women today
receive pension income. And the situation is not improving. Less than half of
working women have access to a private pension or retirement plan at their
jobs. Additionally, women often leave jobs before vesting in a pension benefit,
and because the dollar amounts they receive are smaller, they tend to spend all
or part of any lump sum distribution they receive from 401(k)-type plans.
The third leg of the retirement security stool is individual savings.
Because of the changing nature of employer-provided pensions and savings
plans, women must save on their own and save more than men—not only because
they live longer, but also because they are more likely to have higher expenses
for health care, long-term care and prescription drugs. Unfortunately, women’s
lower average earnings and more time out of the workforce for care giving make
it difficult for them to save the amounts needed for retirement.
The following checklist is drawn from the work of the Committee of Post-Retirement Needs and Risks of the Society of Actuaries and the content and recommendations in the report, “Public Misperceptions about Retirement Security,” published in 2005 by LIMRA International, Inc., the Society of Actuaries, and Mathew Greenwald & Associates, Inc. The Committee has identified the areas in which the public does not understand the realities of retirement planning and that serve as barriers to individuals creating a good solution in this era of individual responsibility.
